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Oil hits new post-2009 low below $56 as supply glut prevails | Reuters
Oil hits new post-2009 low below $56 as supply glut prevails | Reuters.
(Reuters) – Brent crude LCOc1 reversed early gains on Friday to fall to a fresh post-2009 low below $56 a barrel, as a glut of oil that has halved prices since June outweighed investors positioning at the start of the year for a possible eventual recovery.
Brent has slumped to its lowest in more than five years, as top exporter Saudi Arabia and other large Gulf producers have declined to cut production in the face of fast-growing U.S. shale oil output, despite pleas from other members in the Organization of the Petroleum Exporting Countries (OPEC).
“With no production cuts in the offing and a significant demand response years away, oversupply looks to be with us for a while,” said RBN Energy analyst Rusty Braziel in a note. “$100 a barrelcrude oil prices are in the rear view mirror, at least for a couple of years.”
…click on the above link to read the rest of the article…
Energy Crisis As Early As 2016
Energy Crisis As Early As 2016.
Low oil prices today may be setting the world up for an oil shortage as early as 2016. Today we have just 2% more crude oil supply than demand and the price of gasoline is under $2.00/gallon in Texas. If oil supply falls too far, we could see gasoline prices doubling within 18 months. For a commodity as critical to our standard of living as oil is, it only takes a small shortage to drive up the price.
On Thanksgiving Day, 2014 Saudi Arabia decided to maintain their crude oil output of approximately 9.5 million barrels per day. They’ve taken this action despite the fact that they know the world’s oil markets are currently over-supplied by an estimated 1.5 million barrels per day and the severe financial pain it is causing many of the other OPEC nations. By now you are all aware this has caused a sharp drop in global crude oil prices and has a dark cloud hanging over the energy sector. I believe this will be a short-lived dip in the long history of crude oil price cycles. Oil prices have always bounced back and this is not going to be an exception.
To put this in prospective, the world currently consumes about 93.5 million barrels per day of liquid fuels, not all of which are made from crude oil. About 17% of the world’s total fuel supply comes from natural gas liquids (“NGLs”) and biofuels.
Oil’s wild ride in 2014 signals return to volatility – Business – CBC News
Oil’s wild ride in 2014 signals return to volatility – Business – CBC News.
After five years in which oil traded in a narrow band around the $100 US a barrel mark, crude markets returned to volatility this fall.
Back in late June of this year, oil was trading at $107 US a barrel. At year end, it was headed below $55 a barrel.
The months in between tell the story of how changes in supply and demand can lead to wild and unpredictable swings in the price of a commodity.
Geopolitical tensions earlier this year had the effect of pushing oil prices to a peak. It pushed through $100 a barrel in March because of tensions in the Ukraine and then in June, ISIS moved in on oilfields in Iraq, threatening to cut off supplies. Crude hit a peak for the year of $107 a barrel for the West Texas Intermediate contract.
But this summer, markets began to see thedownturn in Europe and Japan were worse than previously realized. At the same time, emerging markets, particularly China, began to lose steam after propelling global growth for the past five years.
“We are seeing significantly slower growth in the emerging economies around the world, so the global economy isn’t growing at a very strong pace and this is the initial reason why oil prices started to fall,” says Craig Alexander, senior economist with TD Bank.
Violence In South Sudan Threatens Chinese Oil Investment
Violence In South Sudan Threatens Chinese Oil Investment.
On December 15, 2013, fierce fighting broke out in South Sudan’s capital, Juba. Rebel forces loyal to Machar targeted South Sudan’s oil fields, and what started as a clash, quickly escalated to a civil war. Violence swept the country, killing tens of thousands people and displacing over one million.
The UN estimates that almost a third of the population, 4 million people, is now in dire need of humanitarian assistance. The promise of nation-building seems to be a distant memory as South Sudanese leaders viciously struggle to claim power.
Months of ongoing political tensions between President Kiir and Machar has inexorably reopened deep fault lines among ethnic groups, begging the question: Can these two main tribal groups reach a common ground before they destroy the world’s youngest nation?
Related: Kenya to Develop Africa’s Largest Wind Project
When South Sudan became independent, it gained not only sovereignty but control of about three-fourths of Sudan’s oil production, a devastating blow to Sudan’s economy. The IMF estimates that Sudan lost roughly 55% of its fiscal revenues and about two-thirds of its foreign exchange earnings. Sudan’s crude oil export revenues were dramatically slashed from a near $11 billion in 2010 to less than $2 billion in 2012.
Oil Price Scenarios for 2015 and 2016 – The Automatic Earth
Oil Price Scenarios for 2015 and 2016 – The Automatic Earth.
A couple of weeks ago I had a post titled The 2014 Oil Price Crash Explained that was cross posted to over 20 other blogs including The Automatic Earth and Zero Hedge. In this post I use the empirical supply and demand dynamic described in that earlier post (Figure 1) to try and constrain the oil price a year from now and in 2016. The outcome is heavily dependent upon assumptions made about supply and demand and the behaviour of OPEC and the banking sector. Three different scenarios are presented with December 2015 prices ranging from $45 to $100 / bbl. Those hoping for a silver bullet forecast will be disappointed. Individuals must judge the scenarios on merit and decide for themselves which outcome, if any, is most likely.
Figure 1 The blue supply line is constrained by monthly production – price data from 1994 to 2008 and shows how supply became inelastic to demand post-2004. As demand continued to rise, prices rose exponentially to $148 / bbl in July 2008 before crashing all the way down again. The blue supply line in this chart is shown as a faint blue dashed line in all other charts to provide a frame of reference.
But first a look at the recent response of oil price dynamics to fluctuations in supply and demand.
“Oil May Drop To $25 On Chinese Demand Plunge, Supply Glut, Ageing Boomers” | Zero Hedge
“Oil May Drop To $25 On Chinese Demand Plunge, Supply Glut, Ageing Boomers” | Zero Hedge.
We have forecast since mid-August that Brent oil prices would fall to “$70/bbl and probably lower”, and the US$ would see a strong rise. As Chart 1 shows, Brent has now reached our target, falling 40%, whilst the US$ has risen 10%. We believe this represents the first stage of the Great Unwinding of policymaker stimulus that has dominated markets since 2009. This Note now takes our oil price forecast forward into H1 2015.
Astonishingly, most commentators remain in a state of denial about the enormity of the price fall underway. Some, failing to understand the powerful forces now unleashed, even believe prices may quickly recover. Our view is that oil prices are likely to continue falling to $50/bbl and probably lower in H1 2015, in the absence of OPEC cutbacks or other supply disruption. Critically, China’s slowdown under President Xi’s New Normal economic policy means its demand growth will be a fraction of that seen in the past.
This will create a demand shock equivalent to the supply shock seen in 1973 during the Arab oil boycott. Then the strength of BabyBoomer demand, at a time of weak supply growth, led to a dramatic increase in inflation. By contrast, today’s ageing Boomers mean that demand is weakening at a time when the world faces an energy supply glut. This will effectively reverse the 1973 position and lead to the arrival of a deflationary mindset.
CONTENTS Page:
1. Oil prices continue bouncing down the stairs to lower levels. Page 2
2. Financial players have destroyed price discovery in oil markets. Page 4
3. OPEC’s high prices have accelerated move away from oil to gas. Page 5
4. Gulf countries risk losing US defence shield if oil prices stay high. Page 7
Oil: The Battle For Market Share & The Saudi’s 1985 Playbook | Zero Hedge
Oil: The Battle For Market Share & The Saudi’s 1985 Playbook | Zero Hedge.
Via BofAML’s Jake Greenberg,
OIL: the battle for market share & the Saudi’s 1985 playbook
Stay positioned for “a good sweating” = stay short the SXEP (European Oil & Gas Stocks) and sell rallies
In 1985, the Saudis chose volume over price to defend their market share against new production from the North Sea, as well as cheating/discounting from other OPEC members in a period of weak demand. With Iraqi exports ramping up, in spite of the war with Iran, the Saudis went around the world signing netback deals, which incentivized refiners to buy/produce as much product as possible…the market was oversupplied and the price of oil fell from $31.72/bbl in November 1985 to $10.42/bbl at the end of March 1986. A fall of 69% in four months!
The Saudis had warned the world of their intentions, but many thought “it was merely an elaborate warning designed to scare other OPEC countries and restore discipline.”
See the chart below – the price remained volatile through 1986 and then saw a sustained recovery with the implementation of an OPEC quota system that members actually upheld until 1989. Interestingly, the agreement in 1986 also included cuts from non-OPEC members Mexico, Norway, and the Soviet Union.
In 1985-86, the Saudis gave the market “a good sweating”…WTI fell more than 69% in four months!
OPEC chief says no target price, but oil slide beyond fundamentals | Reuters
OPEC chief says no target price, but oil slide beyond fundamentals | Reuters.
(Reuters) – The head of OPEC said on Sunday the group had no target price for oil, signaling no change to a policy to maintain production levels which has contributed to sharp falls in the price of crude, unnerving global markets.
Speaking at an event in Dubai, Abdullah al-Badri said the oil price, which dropped to a succession of five-year lows in recent days, had fallen further than market fundamentals should have dictated.
He urged Gulf states to continue investing in exploration and production, saying the United States would continue to rely on Middle East crude for many years.
…click on the above link to read the rest of the article…
U.S. Getting Rid of Oil Addiction as Price Plummets in Glut – Bloomberg
U.S. Getting Rid of Oil Addiction as Price Plummets in Glut – Bloomberg.
The U.S. is producing the most oil in 31 years, economic growth is picking up and crude prices are plunging. So why is Americans’ use of petroleum waning?
As the U.S. moves closer and closer to energy independence, greaterfuel efficiency, changing demographics and an increase in renewables are altering the dynamic that in the past would have seen demand for gasoline climbing. Gross domestic product, the value of all goods and services produced in the U.S., grew at a 2.4 percent pace in the third quarter from the year-earlier period. Oil consumption fell 0.3 percent, government data show.
“Oil demand and GDP growth used to go hand in hand,” Christopher Knittel, a professor of applied economics at Massachusetts Institute of Technology’s Sloan School of Management, said by phone on Dec. 8 from Cambridge, Massachusetts. “Now, they’re in some ways almost independent of each other because of investments in fuel economy that tended to break the link.”
…click on the above link to read the rest of the article…
Brent falls close to $69 after Saudi price cut | Reuters
Brent falls close to $69 after Saudi price cut | Reuters.
(Reuters) – Brent crude fell close to $69 a barrel on Friday, putting it on track for a second weekly decline, as cuts to official selling prices from Saudi Arabia reverberated across the market.
Some analysts said the Saudi cuts to monthly prices for crude it sells to the United States and Asia show it is stepping up its battle for market share a week after refusing to support OPEC output cuts.
“It’s been weighing on the market, showing that OPEC is not ready to end its price war,” said Commerzbank analyst Eugen Weinberg. “The lower the better seems to be the new paradigm for OPEC.”
The January Brent crude contract LCOc1 dropped 53 cents to $69.11 a barrel by 0926 GMT. U.S. crude CLc1 was down 55 cents at $66.26.
A strong dollar, which recently hit two-year highs versus the euro, is another bearish factor for oil prices, as its strength makes dollar-denominated crude more expensive in other currencies.
…click on the above link to read the rest of the article…
US crude imports from Non-OPEC countries peaked 10 years before tight oil boom
US crude imports from Non-OPEC countries peaked 10 years before tight oil boom.
In part 3 of this series on the impact of US tight oil, we look at US crude oil imports from Non-OPEC countries. Excluding Canada – which is a special case due to its integration into the North American oil market – these imports peaked in 2002, long before the tight oil boom started.
(1) Introduction: US oil imports from Non-OPEC countries
The following graph shows an overview on US oil imports (crude + products) since 1960
Fig 1: US oil imports from Non-OPEC countries
Data are from the EIA Monthly Energy Review (table 3.3d Petroleum Trade). They start in 1960.
http://www.eia.gov/totalenergy/data/monthly/#petroleum
Imports peaked in 2005/06. The subsequent decline until 2010 was caused by high oil prices and the financial crisis.
22/7/2013 US oil demand peak was in 2007
http://crudeoilpeak.info/us-oil-demand-peak-was-in-2007
The speed of the decline was similar to the period following the 1st oil crisis. The tight oil boom started in 2010/11, causing a further decrease of around 750 kb/d.
…click on the above link to read the rest of the article…
There Are 300,000 Iraqi Barrels Signaling Oil Glut Will Deepen – Bloomberg
There Are 300,000 Iraqi Barrels Signaling Oil Glut Will Deepen – Bloomberg.
Not only is OPEC refraining from cutting oil output to stem the five-month plunge in prices, it’s adding to the supply glut.
Just five days after the Organization of Petroleum Exporting Countries decided to maintain production levels, Iraq, the group’s second-biggest member, inked an export deal with the Kurds that may add about 300,000 barrels a day to world supplies.
In a global market that neighboring Kuwait estimates is facing a daily oversupply of 1.8 million barrels, the accord stands to deepen crude’s 38 percent plunge since late June. Or as Carsten Fritsch, a Frankfurt-based analyst at Commerzbank AG, put it: there’ll be “even more oil flooding the market that nobody needs.”
Benchmark Brent crude slumped immediately after the deal was signed yesterday inBaghdad, dropping 2.8 percent to $70.54 a barrel. The price, which slipped another 0.2 percent today, is down 9 percent since OPEC’s Nov. 27 decision and 17 percent over the past 30 days.
…click on the above link to read the rest of the article…
OPEC Inaction Spurs Survival of Fittest as Oil Below $65 – Bloomberg
OPEC Inaction Spurs Survival of Fittest as Oil Below $65 – Bloomberg.
West Texas Intermediate tumbled below $65 a barrel to the lowest level since July 2009 amid speculation prices have further to drop before OPEC’s decision to maintain output slows U.S. shale supply.
Benchmark futures in New York and London slumped as much as 3.7 percent, before paring some of those losses. Both grades had their biggest monthly loss in November in almost six years after the Organization of Petroleum Exporting Countries signaled it will leave it to the market to reduce a global glut. Current prices are no guarantee of a significant decline in U.S. shale output, Iran’s Oil Minister Bijan Namdar Zanganeh said in an interview on Nov. 28.
Oil has collapsed into a bear market as the U.S. pumps crude at the fastest rate in three decades while global demand growth slows. OPEC last week resisted calls from members including Venezuela and Iran to reduce its production target of 30 million barrels a day at a meeting in Vienna.
“The market is in panicking mode,” Hans van Cleef, energy economist at ABN Amro Bank NV in Amsterdam, said by phone. “Prices in 2015 will be significantly lower than in 2014.”
…click on the above link to read the rest of the article…
US “Secret” Deal With Saudis Backfires After Oil Minister Says US Should Cut First | Zero Hedge
US “Secret” Deal With Saudis Backfires After Oil Minister Says US Should Cut First | Zero Hedge.
Who could have seen this coming? With oil prices holding at 4-year lows, heavily pressuring around half of US shale production economics, the “secret” US deal (see hereand here) with Saudi Arabia to crush Russia via oil over-supply in a slumping demand world appears to be backfiring rapidly for John Kerry and his strategery team. Capable of withstanding considerably lower prices for longer, Saudi Arabia’s oil minister Ali al-Naimi proclaimed “no one should cut production and the market will stabilize itself,” adding rather ominously (for the US economy and HY default rates), “Why should Saudi Arabia cut? The U.S. is a big producer too now. Should they cut?”
OPEC leader Saudi Arabia signaled on Wednesday it was unlikely to push for a major change in oil output at the producer group’s meeting this week, a day after Russia refused to cooperate in any production cut. Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilize itself eventually.”
…
Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were gearing up for a battle over market share and insisted that non-OPEC producers needed to participate in any OPEC-led output cut.
“The most important thing for all of us is the unity and solidarity of OPEC, and in this situation I believe we need to have the contribution of non-OPEC producers for managing the market,” Zangeneh told reporters.
“Some OPEC members believe that this is the time where we need to defend market share … All the experts in the market believe we have oversupply in the market and next year we will have more oversupply,” he added.
Which led the Saudi Minister to comment…
…click on the above link to read the rest of the article…
Saudis signal no push for oil cut as market to ‘stabilize itself’ | Reuters
Saudis signal no push for oil cut as market to ‘stabilize itself’ | Reuters.
(Reuters) – OPEC leader Saudi Arabia signaled on Wednesday it was unlikely to push for a major change in oil output at the producer group’s meeting this week, a day after Russia refused to cooperate in any production cut. Saudi Oil Minister Ali al-Naimi said he expected the oil market “to stabilize itself eventually” but did not comment on talks with Russia held on Tuesday, which produced no firm pledge from Moscow to help support flagging oil prices.
Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were gearing up for a battle over market share and insisted that non-OPEC producers needed to participate in any OPEC-led output cut.
“The most important thing for all of us is the unity and solidarity of OPEC, and in this situation I believe we need to have the contribution of non-OPEC producers for managing the market,” Zangeneh told reporters.
…click on the above link to read the rest of the article…
